Adrian Ash

By Adrian Ash
Director of Research, BullionVault

This year’s COVID pandemic crushed silver prices to a new record low against gold, spurring a surge of investment demand. March’s buyers have now doubled their money, but might a long- term opportunity remain and does the gold/silver ratio have any value beyond giving a cue to bargain hunters once in a generation?

“I can calculate the motions of the heavenly bodies, but not the madness of people,” sighed Sir Isaac Newton, or so legend has it, after losing some £20,000 when the South Sea Bubble collapsed 300 years ago this autumn.

If the quote is genuine, Newton was in truth lamenting his own greed and folly. Now so old that he could run for US President today, “this shining emblem of Enlightenment rationality”, as one recent historian calls him, had sold out of South Sea stock with a handsome profit in the spring of 1720, only to buy back in at much higher prices as the Company’s directors fought and failed to keep their fraud alive during the summer’s trading frenzy in London’s Change Alley.


Another thing Newton couldn’t calculate, or so posterity claims, was the gold/silver ratio. The diviner of light and gravity, the father of calculus and creator of modern astronomy got his sums wrong when – after leaving academia to run England’s coinage as Master of the Mint at the Tower of London – he proposed a new price for gold Guineas in terms of silver shillings.

Newton’s error “inadvertently” pushed silver coins out of circulation, or so the story goes, “putting Britain on a gold standard” (according to Wikipedia) and with it, the world. Ratio forecasts today, half a century after gold and silver were finally and fully demonetised, have more in common with Newton’s South Sea troubles of course, but many others have claimed to see the ‘correct’ price for gold divided by silver as a world-changing truth since the “well-known miscalculation of the foremost mathematician of the age”, as The Times put it more than 200 years after Newton died.

In the newspaper’s 12-page ‘Silver Number’ supplement of 21 February 1934, The Times reviewed whether silver should again have a role in the world’s monetary system (‘Bimetallism: A disastrous policy, international difficulties’, said the headline over one contribution) because the United States – then on its way to challenging the global dominance of Britain’s pound sterling – had begun buying domestic silver mine output at above-market prices to boost that Depression-hit industry. Formalised with the Silver Purchase Act that June, that “short-run subsidy to silver producers came at the cost of destroying any long-run monetary role for silver”, as monetary economist Milton Friedman wrote in the early 1990s, because it pushed China, the last important silver standard nation, into such a deep monetary deflation and economic crisis that it abandoned the metal and accepted the part-annexation of eastern territory by Imperial Japan, with terrible consequences.

Also playing to the ‘silver lobby’ four decades earlier, political firebrand William Jennings Bryan had run for (and failed to win) the US presidency in 1896 by making his preferred gold/silver ratio his campaign slogan.

‘16 to 1’ appeared on posters, badges and banners, urging a valuation for silver versus gold not seen since the United States joined Germany in abandoning silver and embracing gold as its sole monetary benchmark in what politicians from US silver mine states called the “crime of ’73”.

At the time, Gold was worth twice that much in silver, fixed in law at $20.67 per ounce, while the white metal fell to just 62 cents as silver bullion sales grew with the adoption of gold in all major nations except China.

Bryan claimed in his famous “Cross of gold” speech to the Democrat Convention in Chicago that returning to bimetallism, and fixing silver at its average ratio to gold of the previous century, would boost the money supply, raise agricultural prices and reduce the real value of debt for the farmers in his audience, aiding those “laboring interests and all the toiling masses” while reducing the wealth of “the few financial magnates who in a backroom [currently] corner the money of the world”.


This case for silver as “the poor man’s gold” was turned on its head 70 years later by oil tycoon and thoroughbred horse breeder Nelson Bunker Hunt. With gold in turn now abandoned as the world’s monetary anchor in favour of Washington’s free-floating paper dollar, the richest man in the world thought the yellow metal would soar, but silver was too cheap in terms of both cash and gold, and he saw the market’s mispricing as a chance to grow richer still, telling newsletter tipster Jerome Smith (author of the highly successful Silver Profits in the Seventies, and also of the less prophetic Silver Profits in the 80’s) that from 1973’s level of 35, the ratio would sink to just 5 ounces of silver per one ounce of gold.

Close, but no cigar. As gold prices leapt but silver soared into New Year 1980, the ratio fell to touch 16 for the first time since 1968, averaging just 17.2 that January before starting a relentless, if erratic, climb. It reached 74 on the day that Bunker and his brother Herbert Hunt filed for bankruptcy in December 1989, down to their last $10 million thanks both to silver falling 90% from its $50 peak (gold merely halved from $850) and also to being sued, prosecuted, fined and banned from ever trading the metal again for trying to corner and manipulate the market a decade earlier, all while failing to pay the correct income tax.

While the Hunt brothers’ avarice was so plainly their downfall (Stephen Fay’s excellent history of their silver corner is entitled Beyond Greed), the temptation to trade the ratio has only spread since.


The winner's circle following the running of the D.C. International Horse Race in Laurel, Maryland on November 6, 1976. From left to right: Nelson Bunker Hunt, owner of the winning horse "Youth"; former U.S. Navy Secretary John Warner; Elizabeth Taylor; winning jockey Maurice Zilber; and Laurel Race Track president Joseph Shapiro.

Indeed, “There are only two places where the gold:silver ratio [now] has any significance,” noted Rhona O’Connell (then at T.Hoare & Co, today at StoneX) in January 1997’s Alchemist No. 6, pointing to New York’s Comex futures market and the giant consumer nation of India, “where if the two go out of kilter it is not unusual for holders to sell (relatively expensive) gold in order to buy (relatively cheap) silver.” Transformed by demonetisation into a trading signal, the ratio has repeatedly been named as a prompt for traders, and not only when it peaked. “Historically, silver is still cheap,” reckoned one bank trader to the LA Times in April 1987 after silver made its fastest average monthly gain since 1980, rising 32% from March in dollar terms on a sudden flood of investment buying. That cut the gold/silver ratio from an apparently irresistible 75 to below 55 as rumours spread that top mining nations Mexico and Peru would co-ordinate output cuts to try to boost prices. Four years later, however, the ratio would peak at 100.

April 2011’s level of 35 was, in contrast, “unsustainable”, according to several analysts (including David Jollie, then at Mitsui and now at Anglo American Platinum, whose 2016 article ‘Branding silver’ in Alchemist No. 80 is well worth rereading) – a forecast that soon came good. With silver nearing its record cash price of $50 per ounce, gold showed its cheapest valuation since 1983 in terms of its once monetary sister, dipping to 31 times the silver price before rising to 45 times by the time gold set its own financial crisis peak at $1,920 four months later. The ratio has since averaged 72, marking a sustained derating of silver and culminating (so far) with gold jumping to a spectacular peak in relative value during this spring’s COVID crash, when the looming virus pandemic spurred panic across all finance and commodity markets.


Ask anyone who bought silver in March 2020 (or who now tells you they did) and the 11-year low in nominal prices probably won’t lead their reply if it figures at all. Every bargain buyer I have spoken to says they took the gold/silver ratio as their cue, because while gold’s worth versus silver was “the highest on record”, as Reuters reported on 19 March, investors and speculators looking through the other end of the telescope saw that silver had never been cheaper. Based on the LBMA benchmarks, gold peaked that morning at more than 123 times the price of silver, offering what has so far proved to be a truly historic opportunity, paying almost 150% gains at silver’s August top and still more than doubling the money of March’s bargain buyers at the time of writing.

Is that all the ratio is now good for, giving fast-fingered if not brave traders their cue?


The gold/silver ratio exists as a concept today thanks to 2,500 years and more of monetary use. While paper notes began replacing gold in everyday commerce back in the 19th century, and while both metals had been used more as reference points for mental accounting than as hand-to-hand cash for extended stretches of time before then (Western Europe’s ‘bullion famine’ of the 15th century preceded and spurred Columbus’s accidental discovery of the Americas), the very first coins were either gold, silver or copper, wherever they were invented (sometime around the 7th century BCE in each of what is now western Turkey, northern India and north-eastern China).

These three metals, the same metals our grandparents and great-grandparents knew as coins in the early 20th century, differ so much from each other in appearance and scarcity that they clearly carried different levels of purchasing power. So where more than one metal was minted (which was soon pretty much everywhere touched by the idea of coined money) and while copper was used to strike ‘token’ money worth far more than its market value in precious metal terms, a ratio for gold to silver had to be chosen. The choice of a ratio “was inevitable”, says Glyn Davies’ A History of Money. Yet that ratio then immediately “came under pressure”.


Firstly, people might not accept the ratio the government set. Henry III of England, for example, introduced the country’s first gold coin, the oddly named ‘Gold Penny’, at a ratio of 10:1 in 1257. Worth 20 pence in silver at face value, it soon traded at 24 pence and disappeared from what little use it found, melted for profit (and leaving perhaps just eight examples today) after the resulting confusion saw the citizens of London force the King to announce that no one was obliged to take it in payment.

Secondly, some people couldn’t help stealing a little metal from the coins as they passed through their fingers, nor could the government be trusted to retain full weight or full fineness at its mints. Both rulers and subjects invariably chose to clip, mint or forge debased alloy coins in silver, but not gold. Even history’s greatest debasers – the Severan and then Tudor dynasties of ancient Rome and early modern England – didn’t mess with the yellow metal, perhaps discouraged by its divine and imperial associations if not their own self-interest.

Throughout history, silver was mainly the medium of retail and domestic trade, with gold used in wholesale and foreign trade, and also to store out-sized wealth.

Thirdly, and even with full-weight coins of the correct fineness, the local supply, demand and flow of bullion meant that the ratio in one country would differ from that of its neighbours. This arbitrage widened the further you went, so where late 7th century Byzantium (now Istanbul) priced gold at 18 times silver and the Islamic Empire to its east put it at 14 times, Western Europe priced it at twelve times, a gap keenly exploited by merchants and traders with the means to buy and ship gold from where it was valued less highly to kingdoms where the gold/silver ratio was higher. Rinse, repeat and slowly drain that precious metal from one place to another for profit.

The late 17th century found England facing a crisis from all three problems. Fifty years of civil and foreign wars under the Stuart dynasty’s failed but repeated attempts at absolute monarchy had left the Crown short of silver, leading it to mint ever lighter coins, while forgery and clipping ran wild. By 1695, the bullion content of coins in circulation was barely half what it should have been, risking monetary and economic collapse.

Time to call in the magician.


The fact that, in 1720, Sir Isaac Newton could be so philosophical about his South Sea misadventures shows how dramatically his fortunes had changed during the second act of his life. Now aged 78, and despite losing the equivalent of £1.4 million that September at today’s silver prices, he would still die a very wealthy man seven years later. His pall bearers included two dukes, two earls and the Lord Chancellor.

Yet, Newton had been almost penniless when, already the most famous mind in Europe, he reached 50, hit burn-out and, following the death of his mother, suffered a mental breakdown lasting two years. Distressed by the despair and paranoia in his letters, Newton’s friends rallied round – including the philosopher John Locke and senior civil servant (and secret diarist) Samuel Pepys – urging him to quit the monkish gloom of Trinity College, Cambridge and move to London to pick up £1,500 a year as Warden of the Mint.

The job, if you could call it that, would require “not more attendance than you can spare”, according to the man who arranged it, Newton’s former student Charles Montagu, now Chancellor of the Exchequer and a founder of the Bank of England, the South Sea Company’s bitter rival (and the Exchequer’s eager saviour after that bubble collapsed). The six previous Wardens had barely turned up for work, delegating everything to their clerks while collecting a salary worth something today between that of the Prime Minister and a deputy governor at the UK central bank.

Newton certainly enjoyed his new income, taking a four-storey town house in West London’s fashionable St. Martin’s Street as his home. But unlike his predecessors, the mathematician and physicist threw himself into the task, no doubt relishing the work because he also happened to be a keen alchemist.

You wouldn’t know this from Newton’s marble monument in Westminster Abbey (the books supporting his statue’s right elbow are titled ‘Divinity, Chronology, Opticks’, while the Latin inscription calls him ‘Scientist, mathematician, astronomer’) and it doesn’t square with the powdered-wig Member of Parliament, President of the Royal Society and all-round establishment gent he became during his second and vastly more profitable career in the City. But of the 10 million words Newton left in manuscript, according to historian Sarah Dry, roughly three million relate to science and maths, half are on religion and one million words are on alchemy – secret codes, arcane symbols, occult figures, the lot.


Scouring the Bible to decode God’s plan was common enough, but calling the worship of Christ ‘idolatry’ (as Newton does in one paper) would have scandalised High Anglican London. Toying with magic on the other hand – albeit to distil alcohol, make pigments, dyes and medicines, and purify gold and silver – so horrified his heirs that they hid his alchemical works after his death in 1727, only to shock and dismay later admirers when they in turn discovered his invocations to Neptune’s Trident, Mercury’s Rod and the Green Lion.

“Whatever the ultimate purpose of Newton’s alchemical investigations,” as the wonderful Chymistry of Isaac Newton site hosted by Indiana University in association with the University of Sussex’s Newton Project says, “it is clear that we cannot erect a watertight dam separating them from his other scientific endeavors.” Chief among them, his lifelong experiments in refining, assaying, cooling and weighing precious metals made Newton the ideal candidate for assisting with the Great Recoinage of 1696, when England’s tattered and debased silver money was called in and cancelled before smelting, refining and re-minting at full weight and 925 sterling fineness.


To protect England’s newly restored coinage, Newton pursued and prosecuted forgers and coin clippers with a passion, ensuring that the notorious counterfeiter and gang leader William Chaloner was publicly hanged and disembowelled at Tyburn in March 1699. Such violent enforcement of the Crown’s monopoly, plus the fear Newton instilled and the treachery he exploited among London’s underworld – winking at bribery, entrapment and extortion by his “very scandalously mercenary” staff – seems to have worked. The number of executions for coinage crimes in London fell from 19 in 1696, the year that Newton joined the Mint, to zero in 1700.

What Newton’s secret police tactics failed to stem, however, was the outflow of silver abroad. A proclamation under Charles II in 1670 had established a value in silver shillings and pences for the new gold Guinea coin (so-called because the ore came from what is now Ghana on Africa’s western coast), but repeated meddling with the ratio still failed to find the right level to discourage these exports, and England’s return in 1696 to full-weight shillings and pennies only made the arbitrage more profitable.

Looking to fix this problem, Newton wrote in his report on the state of the gold and silver coins of 21 September 1717 that while a Guinea was worth 21 shillings and 6 pence in England, the relative value of gold to silver would price it at about 20s 9d in Spain or Portugal, and lower again in France. Put another way, “Gold is in Spain and Portugal of sixteen times more value than silver of equal weight”, while an edict in France priced it at 15, “[and] in China and Japan one pound weight of fine gold is worth but nine or ten pounds weight of fine silver; and in East India it may be worth twelve.”

“This low price of gold in proportion to silver carries away the silver from all Europe but most especially England,” Newton explained, sucking it into Asia, where silver was more highly valued against the yellow metal. As a remedy, the alchemist’s report led Parliament on 21 December 1717 to ask His Majesty George I to “forbid all persons”from offering or accepting “any of the Pieces of Gold called Guineas” at a rate above 21 shillings “and so proportionately for any greater or lesser piece of coined gold”.

Now, it is true that this slightly lower valuation for gold – effectively a ratio of 15.2 – only slowed and didn’t halt the outflow of silver.
But note the capital letters on ‘Gold’ and ‘Guinea’ in the House of Commons’ address, emphasised in the way that ‘Silver’ and ‘Shillings’ had been in previous orders. Note also that where earlier edicts said no one was “obliged” to accept the guinea above a certain price in silver, now it was forbidden. “Gold was henceforth tied to the money of account,” as historian C.R. Fay, responding to The Times’ Silver Number via the Cambridge Historical Journal, wrote in 1935, “and at once became the de facto standard.”

Newton’s infamous ‘error’ of 1717 didn’t, therefore, put England and the world on gold “inadvertently” over the following century, or not as the common history believes. The shift was immediate and deliberate, if not fully understood at the time.


Historian C.R. Fay wrote in 1935


Fast forward to late 2020 and, despite recent attempts by some Bitcoin and other crypto asset promoters to revive the metal’s monetary use, neither gold nor silver have functioned as units of account or exchange for almost half a century (not outside the housing market in Vietnam at least, where part payment in gold is common). Where they do retain monetary use, however, is as a store of value. Hard to distinguish from investment in any other assets perhaps, this use is of course led by central banks for gold but is regularly cited for both metals by private bullion buyers and owners.

What then of the gold/silver ratio today? Where gold used to facilitate wholesale and international trade, and silver was for more local and everyday transactions, the yellow metal is now famously useless to industry (less than 10% of annual demand), while silver has become “the indispensable element” (as Washington’s Silver Institute puts it), needed in a vast and growing range of technologies and processes which consistently account for more than 55% of end-user demand each year.

This explains why the gold/silver ratio shot to new all-time highs this spring, driven above its peaks of 1940 and 1991 as the COVID catastrophe almost shutdown global economic activity overnight, suddenly making useless, incorruptible gold supremely useful in a locked-down world. That peak however gave no real insight into our economic or financial future, not beyond predicting to eager traders that silver’s value – both industrial and investment – was very likely to rally.


The pace of the ratio’s dramatic retreat, now back down to the mid-70s, shows that the cultural memory of both gold and silver as money is proving very persistent as quantitative easing and zero-to-negative interest rates, applied to try and revive inflation and growth, force savers to find alternatives to official currency. Anyone considering an investment in one or the other precious metal today should remember that, as historian Andrew Watson said of Western Europe’s medieval coinage compared to that of the Eastern Mediterranean, “To study the monetary history of the one in isolation from the other is like watching a football match from a seat which overlooks only half the field.” But for anyone seeking or believing in a consistently ‘true’ rate for an ounce of gold priced in ounces of silver, it is also worth noting that not even Isaac Newton – almost as devoted an alchemist as he was a passionate decoder of the Bible’s hidden secrets – found anything mystical or eternal in the ratio.

Adrian Ash is Director of Research at BullionVault, the precious-metals market for private investors online and by smartphone.

Adrian has been studying and writing daily on gold and silver for nearly 20 years. He's grateful to a friend of the LBMA’s Fergal O'Connor, for pointing him to source-data for pre-1968 prices. Any errors are of course Adrian's.